The huge cost of not shopping around for financial services products

We all know that shopping around can help us save money. But when it comes to financial services products, it can really help us save.

Despite this, due to either inertia, fear, or a lack of knowledge, Irish consumers don’t properly shop around for banking products. We’ll often jump through hoops each year to save €50 on our car insurance but when it comes to saving hundreds or thousands on a loan, credit card or a mortgage, we don’t show the same level of interest.

In fact, according to recent research from the Economic and Social Research Institute (ESRI) in early April, 73% of consumers didn't shop around for their current account while the figure was 68% for loans and 74% for credit cards. Even when getting a mortgage, 46% did not compare offers.

However, by not comparing the market and seeking the best value, you could potentially leave yourself thousands of euro out of pocket.

Our research shows that personal loan rates can go from just 5.99% to 17.1% APR. First-time buyer mortgage rates range from 3.40% to over 6%! And there's a staggering difference of almost €10,000 in the cost of a €50,000 ‘green’ home improvement loan.

Let's look at the research in detail...

Personal Loans 

Lenders can charge different rates of interest depending on the loan amount and the purpose of the loan. On top of this, some providers such as An Post Money, Revolut and Avant Money will charge different rates depending on your credit profile. So it can make comparisons more tricky. 

Quite often you’ll only be told your exact rate once you've fully applied for the loan. Which isn’t ideal. 

For example, An Post Money’s rates for loan amounts of €20,000 and above vary wildly - from 7.5% to 16.9% APR depending on your credit worthiness.   

Permanent TSB (PTSB), meanwhile, charges different rates depending on the size of the loan. For example, it charges 14.3% APR on loan amounts up to €6,999 and 12.5% APR on loan amounts between €7,000 and €12,999. What this means is that someone borrowing €6,900 over 5 years would actually pay back the same amount in total as someone borrowing €7,155.

You're highly unlikely to switch your personal loan, and in most cases you won’t be able to, so it’s really important that you shop around and get the best deal possible in the first place.

For example borrowing €50,000 for a 'green' home improvement loan over ten years could cost you almost ten grand more if you went with the most expensive option versus the cheapest. It’s a huge sum of money. Even a small €5,000 personal loan borrowed over five years could cost you over one grand extra.

The lowest and highest rate for someone taking out a €5,000 personal loan over five years - excellent credit rating 

*This is the rate for those with the best credit profile. Revolut charges up to 12.99% for those with poorer ratings. 

The lowest and highest rate for someone taking out a €5,000 personal loan over five years - average/OK credit rating 

The lowest and highest rate for someone taking out a €20,000 personal loan over five years - excellent credit rating 

*This is the rate for those with the best credit profile. A rate of up to 12.99% applies to those with poorer profiles. 

The lowest and highest rate for someone taking out a €20,000 personal loan over five years - below average/OK credit rating

The lowest and highest rate for someone taking out a €50,000 green home improvement loan over ten years

Mortgages 

Buying a home is one of the biggest financial decisions you’ll ever make and your mortgage repayments are likely to be your largest monthly outgoing for years.

At the moment there is a huge variation in mortgage rates.

The rate you'll pay will depend on the size of your deposit, the amount you're borrowing, the energy efficiency of the property you're buying, and whether you choose a variable or a fixed rate. So there's lots to consider!

At the moment you could spend thousands of euro extra in just one year by choosing the wrong rate.

The lowest and highest variable mortgage rate for a typical first-time buyer borrowing €270,000 over 30 years with a 10% deposit.*  

 The lowest and highest five-year fixed mortgage rate for a typical first-time buyer borrowing €270,000 over 30 years with a 10% deposit.**  

 *Finance Ireland’s ‘Progress Plus’ rate for those with impaired credit histories hasn’t been included in these comparisons. The PTSB rate is a discounted rate for one year. Rate reverts to +0.5% after one year. The cheapest non-discounted rate is 3.50% with Haven.   

**green rate: best non-green rate is 3.80% with Avant Money 

Current Accounts

Many of us have had the same current account for decades. Perhaps it was the account our parents chose for us when we were still teenagers. Or maybe it was the account you signed up to during Freshers week in college all those years ago.

And although the savings aren't as high, why pay up to €100 a year for something you could get for free?

The lowest and highest fees for a current account (medium to heavy use)*  

*The estimated monthly cost of each account has been based on a customer making 3 ATM withdrawals (totalling no more than €200 in cash), 3 lodgements, 5 chip and PIN transactions, 5 online transactions, 10 direct debits, and 30 contactless payments per month. 

Credit Cards

Some of us rely on our flexible friends more than others. And if you're good and pay off your balance in full each month then the interest rate you're charged may not matter quite so much.

But if you do have a balance on your card, the rate can make a big difference on how quickly you'll pay it off. 

There is a wide range in rates right now from just 13.8% to 22.9% APR. And some providers offer attractive 0% balance transfer deals. So whether you already have a credit card or are looking to apply for one for the first time, make sure you fully compare the market.   

The lowest and highest rate for someone with a €3,000 balance on their credit card

Advice for shopping around for financial service products

So, how can you endure you don't overpay for your banking products?

• There are lots of sites out there to help you compare financial services products and get the best rate. Use them. And of course this includes bonkers.ie where you can quickly and easily compare mortgage rates, loans, credit cards and current accounts. 
• You don’t have to go with your ‘main bank’ for your loan, mortgage or credit cards. Other banks will be more than willing to give you their business subject to you meeting their normal underwriting criteria.  
• When it comes to your mortgage, using a mortgage broker like bonkers.ie can help you get the best rate for your particular circumstances. 
• The credit union provides a great service. And the personal touch. However they aren't always the cheapest. So again shop around.
• The same energy that you put into getting better value car insurance each year should apply to all your other bills!
• Most lenders charge different loan rates depending on the purpose of the loan. If you're taking out a loan to make energy efficiency improvements to your home in particular you might be able to get a cheaper rate. And most credit unions offer lower loan rates for those borrowing for educational purposes. So before agreeing to a particular rate, always double check you're not entitled to a lower rate.

Easily compare banking products on bonkers.ie

On bonkers.ie it’s quick and easy to compare all banking products in one place! Review fees, interest rates, and account features across a range of products in a few clicks.

Our free comparison services allow you to cut the cost of your banking expenses across current accounts, savings accounts, credit cards and prepaid credit cards, and personal loans.

You can even apply for a mortgage through our free mortgage broker service! 

You can also compare a range of other insurance services, energy tariffs and broadband deals.

Let's hear from you!

Are you surprised that so few people shop around for banking and personal finance products? Do you shop around before committing to one product? We'd love to hear your thoughts. Get in touch with us on Facebook, Twitter and Instagram.